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Re: valuemind post# 111806

Friday, 03/22/2024 7:50:53 AM

Friday, March 22, 2024 7:50:53 AM

Post# of 112576
Valuemind- glad I could help

SMCI right now is expected to make $31 in eps for fiscal 2025. The share price is around $1000. The growth from fiscal 2004 to fiscal 2005 is expected to be about 37%, and the PE is about 35 going forward, so this would translate to a PEG ratio of 1 to 1. As growth slows, the PEG ratio generally gets higher. For example, with NVDA, when it was growing at 50%+ yoy, the PEG ratio got at low as .5, but is now 1.5. The reason for this is, eps growth expectations for fiscal 2026 have slowed to 20%, and the PE has gone from 50 to 30 going forward. My opinion is, the same will happen with SMCI. I mean analysts haven't gone out to fiscal 2026 on SMCI, but if growth is expected to slow from the 37% currently. then the stock has likely peaked, and will sell at a lower PE, and the same or higher PEG ratio.

Now, if SMCI can keep growing eps at 37%/year, then the stock could go significantly higher, assuming the PEG ratio stays at 1. However for growth to stay the same, assuming $31 in fiscal 2005, then would have to make $43 in fiscal 2006. If they can do that, then the stock could go to $1500, no problem. The issue I have is, if NVDA eps growth expectations have slowed so much, then will SMCIs come down as well ? So the question is, at what pace can SMCI keep growing, and will it out pace NVDAs growth ? I mean there will be saturation as some point, and there will be more competition. Also as you can see, when SMCI corrects, its violent ! I mean I've seen the stock fall 25%- 30% from top to bottom in one-two sessions, twice over the last couple months ! IMO SMCI and NVDA have both become more like a gamble than anything. Holding tech growth stocks like these two, with the assumption that AI will will keep these stocks going crazy for years, is a risky view. I think SMCI topped out at $1250, and NVDA at $990.

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